This time last year, animal genetics specialist Genus (GNS) was reporting largely flat adjusted operating profit from its porcine business as Chinese pig herds were decimated by the outbreak of African Swine Fever (ASF). While the ASF epidemic remains ongoing, high pork prices and government incentives mean farmers have started rebuilding their herds, fuelling demand for the Genus' breeding stock. The six months to 31 December saw porcine adjusted operating profit rise by 28 per cent at constant currencies to £62.6m, with an almost threefold increase in China.
Rabobank estimates around 50 per cent of China’s pig herd was wiped out in 2019 meaning restocking opportunities are no flash in the pan. Genus will also benefit from the royalty payments from the offspring of its sows. With ASF driving a shift away from backyard farms to more industrialised pig production, the group plans to triple the size of its Chinese supply chain from 2018 levels to meet higher commercial demand.
Meanwhile, the bovine division is benefitting from structural changes in the dairy industry. Demand is increasing for sexed-dairy genetics to improve the chances of producing female cows as well as beef-on-dairy genetics that increases the value of animals destined for the beef supply chain. Bovine adjusted profits increased by 17 per cent at constant currencies to £14.6m in the first half.
House broker Liberum expects adjusted pre-tax profit of £67.4m and EPS of 78.7p in 2020, rising to £77m and 89.7p in 2021.
| GENUS (GNS) | ||||
| ORD PRICE: | 3,534p | MARKET VALUE: | £2.3bn | |
| TOUCH: | 3,528-3,536p | 12-MONTH HIGH: | 3,534p | LOW: 2,146p |
| DIVIDEND YIELD: | 0.8% | PE RATIO: | 58 | |
| NET ASSET VALUE: | 762p* | NET DEBT: | 22%** | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 28.7 | -6.8 | -11.7 | 8.9 |
| 2019 | 34.4 | 30.4 | 36.5 | 9.4 |
| % change | +20 | - | - | +6 |
| Ex-div: | 5 Mar | |||
| Payment: | 2 Apr | |||
| *Includes £179m in intangible assets, or 274p a share, **Includes £29m in lease liabilities | ||||
